College costs

[Arif]

Talk about long term! Our son is turning four next month and I'm trying to determine if we are on track to have half of his expenses for college. When we started the 529 plan we estimated his total college costs for four years would equal $140k. This estimate was not based on an Ivy league education but rather a small private school similar to the one we attended. My question for those that have been down this path already with kids in college is, "was your planning close to reality when it was time to send junior off to school?" And also what percentage was covered by scholarships, grant etc.?

 

[Rich_by_the_Bay]

Won't work for every family, and it was just dumb luck more than planning, but we lived in a very education-friendly state, and paid the taxes to prove it (Wisconsin). Between my two kids, we paid for 13 years of university tuition and it never cost us more than $10K per year including room and board. In retrospect, the U. of Wisconsin neutralized all the high property tax we ever paid. Both kids were good students who might easily have gone to pricey private schools. Couldn't talk either one into going elsewhere.

I myself went to a high quality state school at a very fair tuition (not so rich family). So, just saving a ton for kids college may not be the only strategy to consider. Schools like Virginia, North Carolina, Wi, Michigan, Florida, UC Berkeley, SF or LA, Wa, Oregon and many others offer top notch education at reasonable in-state tuitions, plenty suitable for even the best students.

Just something to consider as the time approaches. To answer your original question, we overplanned as a result of the above. All set to do the home equity thing but never needed to. Go Badgers!

 

[Nords]

My question for those that have been down this path already with kids in college is, "was your planning close to reality when it was time to send junior off to school?" And also what percentage was covered by scholarships, grant etc.?

I have a spreadsheet (of course I have a spreadsheet!) updated annually from the survey data at CollegeBoard.com.

We started in Nov 1992 at $400/month with EE bonds for the first few years (the Peter Lynch approach). Later we rode the '90s and the tech wreck with Heartland Value & Tweedy, Browne Global Value. When Berkshire Hathaway went on sale in 2002 we picked up a chunk.

529 plans were a lot more exotic then so we started with a UTMA (lower tax basis) and later just fenced off some parental money. She'll probably be penalized for her UTMA assets but we're trying to figure out other approaches.

Our savings return has tracked just fine with the spreadsheet costs (not just tuition but also room & board, books, and so forth). Worst case is a fully-funded local community college/UH. Best case is whatever she's willing to chase scholarships & work & student loans for, although we'll probably have between $120K-$160K by 2010.

The accumulation phase has gone just dandy, but now we need to start minimizing taxes on the cap gains (beginning in 2007? 2008?) and moving the money to CDs. We'll keep putting money aside through 2010 but by then we expect to have a much clearer picture of costs.

Of course our kid's recent interest in a military academy has #$%^ed up all that planning... in a good way!

 

[larry]

DD's costs will have run about $15k for a 4 year double major at a small state 4 year university.  Saved enough to pay for 4 years, 1 wedding and enough left over to buy 1/2 of a decent car.  
We had put it in custodial trust because there weren't many other options 20 years ago.  Her savings did affect her ability to acquire scholarships because alot of them were need based and filling out the FASFA didn't help either because of our assets.  She did receive some academic scholarships that saved about $4000 total.  
All-in-all, save as much as reasonable (but don't let it cut into your retirement savings plan), apply for scholarships early and often and as many as possible and realize that it is not a bad thing to have your kids work their way through college to make ends meet.  Good luck, report back in 15 years

 

[mb]

I have one in HS and one in JH and I'm assuming a U of CA campus and budgeting $20k/year/kid.

Agree with R_in_T on high quality state schools and would add Minnesota and Illinois in particular to his list.

Problem is if you are not a state resident.

MB

 

[Brat]

Schools like ... UC Berkeley,...

Add Cal Tech.  Really tough to get into.   For some majors they could make Harvard and MIT look like a cake walk.

If you lived in Alaska you will pay instate tuition at many State schools because of interstate agreements.

IMHO make sure your kids get the best k-12 education possible, and while they are hitting the books set aside resources to pay for college.  When the time comes the best school for your student may not be in-state.  I have my biases based on the resources a state devotes to public primary and secondary education.  

 

[haha]

Someone called in to Bob Brinker's radio show Saturday. He had just refinanced his house, taking down a $445,000 loan at 6 3/4%. The family lived in NYC. He has a son and daughter attending private schools- son at Boston College at $43,000 per year as I remember, and daughter at NYU @ $47,000 pa.

Now get this- the DD is studying nursing!!!

Not a bad career, but imagine having to amortize the expense from nursing wages if her father were not paying. Judging from the tremor in his voice, I think he was not in a really good place to be doing this.

Holy cow, she could go to CUNY for probably 1/10 of that, and get the exact same job. She could move to Zimbabwe, and go for 1/00 of that, and come back and get the same job.

Parents are crazy.

My sons both put themselves through UW, both are very successful, and one has 0 loans and the other has $2700.

The idea is if they are going to be on the hook for whatever it costs, they are going to be damn sure that they get what they want and need in a cost effective manner.

I would and did give any amount of time to them, and still would. But it doesn't make sense to me to mortgage my life as I get older, instead of them mortgaging theirs if it had been needed.

Also, I believe the Daddy Warbucks thing is bad for family dynamics. My kids started college, they were adults. They knew it, I knew it. No temptation for me to tell them how to lead any part of their lives, which IMO is as it should be.

Ha

 

[kramer]

I do not understand why many parents feel obligated to pay 100% of their childrens' college costs. My opinion is that this is usually harmful for the child. I generally advise parents to pay 40 to 70 percent of their kids' undergraduate costs (depending on the child and circumstances), and zero percent of their kids' graduate school costs, and that these are the cost targets that should guide their saving.

My parents paid zero percent for me. I do not recommend this at all (and, in fact, I am still incredulous at my parents' lack of planning at that time and in the present, too). But it certainly made me a better person in many ways. Also, I was the most serious student of all time during school. And I did my master's degree in electrical engineering in nine months and had a large number of job offers 10 weeks before I graduated. Accumulating debt has a way of focusing the mind.

Also, I was able to get a job in my field during my last two and a half years of undergraduate, and this experience actually helped form my whole career. I probably would have turned this job down to begin with (I started it working for free the first three months while working another job and taking an upper division summer class) if mommy and daddy were paying all the bills.

What I see in many college-age kids is a lack of adult responsibility, which I think is often exacerbated by parents paying full freight.

Kramer

 

[Brat]

HaHa and kramer, I agree.  

Each of my kids had some of their own skin in the college tuition game.  They considered the cost of schools in their decisions.  The other reason for having some of their skin in the game is to keep them focused on completion (and not choose underwater basket weaving as a major).

One went to an out-of-state school and quickly figured out how to qualify for in-state tuition (we had saved for his education in a UGM account which held over two years of living expenses - he was emancipated), the other took college loans to attend a selective private university (we helped her re-pay after graduation).  Her talents, and her education, have enabled her to do very well.

 

[mb]

Add Cal Tech. 

Cal Tech, great school, but it is private not state,

MB

 

[shorttimer]

we took a little different tack. Kids are done with school. There were no 529 plans at the time. When we looked into the Fafsa we realized they counted the kids assets at a higher rate than the parents. Therefore, although we had a high income, we looked like we had no assets, it was all in retirement plans and house, which we agressively paid off. When they attended school all of my wages went to them as one half of a dual income family. They were aware that if anything happened, like layoffs we would not be able to continue.
We paid four years on instate tuition/room/board. The one that went to private school paid the difference himself, but because he qualified for grants he only paid a few thousand a year more.

They both got professional degrees, one an engineer. They both have made more than me from the first year on the job. They are very greatful for all we did.

I have no regrets, but we focused first on our retirement money. I figured we did not have the time to make it up if we did not save enough. They had plenty of years to pay for loans etc. if we were unable to help them. You cannot predict what state your family will be in fifteen years down the road.

I don't know how the current laws count assets, but I never regretted paying off the house or fully funding retirement accounts.

 

[BarbaraAnne]

Don't forget Texas' excellent flagship schools - Univ Texas and Texas A&M.

We have one in college and one on the way and are very impressed with the both universities, especially at in-state tuition rates.  Even more so with the prepaid tuition plans we were able to get them before the prepaid tuition plans were discontinued.

We are funding their tuition and room and board.  Summer jobs fund books, misc expenses and fun.

Graduate school is at their expense.  Let's see how creative they can get...

 

[azanon]

I think a responsible thing a parent should do is save a reasonable amount for their kids college ideally from the moment they are born.  I started out with $150/month, but i backed it down to $100/month into a 529 plan, asset allocation type mutual fund.

My dad paid for my tuition/room/board in undergrad; the balance that wasnt covered by my scholarships.  I also voluntarily took on a work study for 15 hours/week to pay miscellaneous expenses.    I had full tuition remission for graduate school, and got paid quite well as a TA in grad school so i was fully on my own by them.

In contrast, my wife's dad (parents split) didnt help her at all and her mom was pretty poor so she only  helped the little bit that she could, so my (now) wife had no choice but to load up on loans.  We actually got married, and it got to the point where she might have had to drop out of college.   Predictably, my dad came to the rescue and basically paid for several of her loans.   Before i allowed my dad to do this, i actually confronted her dad about the matter, so that he knew that my dad was bailing his daughter out of a financial situation she couldnt handle.  

Yes, i was married to her, but I was 20, still a college kid making 8/hr in a work study, and clearly not of the means to pay something as substantial as her college tuition.  You might say maybe i wasnt in a financial position to marry her yet, but my counter to that is that it collectively cost us less/year to live together married in one cheap apartment than it did for us formally to pay dorm fees times 2.   

In short, this didnt bother her dad one bit.  Not surprisingly, it doesnt bother me either to have nothing to do with him every since then.   In my family we help each other when we need it.   His idea of family and mine clearly differ.  I guess the idea of reaping what you sow is still alive and strong.

As you can tell, i feel pretty strongly that its a moral obligation for parents to help on college costs which are clearly very excessive and a substantial amount to handle even for parents with great jobs.   These are 18 year old kids that are in no position to fully handle the burden of the tuition at a decent quality school.   Sure there are scholarships and grants, but those rarely cover everything.  Its adults like me that are in a position to save for them to help, and I just feel its a moral obligation.

I hold her dad accountable for being callous to my wife's former predicament.  If he wants to make amends with me, then he can pay for this 11K dollar sallie mae loan of her's i'm still paying for.   He also owes my dad about 30K dollars.  So until he's ready to sat things straight, he gets to drive 10 hours everytime he wants to see his grandson.

My theory on those here defending their parents for not paying anything is just that they are used to a family setup where every man/woman is out for themselves.  That's how my wife's family is.   She can call her dad/brother/aunt, and tell them about a bad financial crisis, and basically the response will be "I hate it for you!".    In contrast, my parents/family would be figuring out what they could do to help.    I think its ironic by having that helping attitude, that everyone actually ends up more well off/more wealthy than they do with the selfish attitude.

My son's only 3, but I just cant understand abandoning him on something like that when he's 18.   Its literally beyond my comprehension. I wont necessarily pay everything either, but he should have a nice chuck of change in that 529 by then. And i'm sure i'll keep the deposits going while he's in school too, and step them up, if need be.

Azanon

 

[youbet]

Problem is if you are not a state resident.

You betcha! Sent son to Purdue and we live in Illinois. Very satisified with Purdue for an engineering education, but darn pricey for out-of-staters!

 

[youbet]

We are funding their tuition and room and board.  Summer jobs fund books, misc expenses and fun.

Graduate school is at their expense.  Let's see how creative they can get...

That's exactly how we did it.  I was making pretty good money at the time and we were able to pay tuition, room and board out of current earnings, so we did.  He co-op'd and more than covered books, personal expenses, etc.  Then he went to work at MegaCorp and they paid for the engineering MS done part time.

There has been a lot of talk about 529b plans on this thread.  Folks, don't forget about ESA's.  You can only put $2K/yr/child into them, but after funding an ESA, you can put the balance of the total amount you want to save into the 529b of your choice.  The ESA has greater flexibility.  I plop $2K/yr into ESA's for each grandchild.    



 

 

[brewer12345]

There has been a lot of talk about 529b plans on this thread.  Folks, don't forget about ESA's.  You can only put $2K/yr/child into them, but after funding an ESA, you can put the balance of the total amount you want to save into the 529b of your choice.  The ESA has greater flexibility.  I plop $2K/yr into ESA's for each grandchild.    

Yeah, I pretty much punted last year on the college savings thing, but I think I will definately be setting up Coverdells this year for my two kids, provided I am not over the AGI limitation. I cannot say I am that wild about 529s, but I will have to revisit the idea now that the tax treatment of these things has been made permanent.

 

[youbet]

I will definately be setting up Coverdells this year for my two kids, provided I am not over the AGI limitation. 

Good point.  I forgot to mention the AGI limitation since the ESA's I fund for the grandkids are owned by their dad, my son.  Sadly, he's still not in danger of going over the AGI limit.........  So, for you old geezer grandparents out there, you can't own ESA's for the grandkids, their parents must own the accounts.  And the AGI rule applies to the parents.  But, drum roll, grandparents are allowed to provide the money to fund the accounts!  Aren't we the lucky ones

 

[OAG]

You all make me feel like a real piker regarding my kids higher education. Of course the first one graduated in 83 and the last one in 92 so this is really historic and may not be relevent to the times we live in now. Here is what I did (gosh this sounds bad).... Oldest Son went to a military academy (pratically 0 cost). Oldest Daughter almost went to an academy but she opted for the best school in the state (UVA) away from home -- Her Dad made her work and save her money from age 10 or so -- she also qualified for and took a ROTC scholarship for the first two years. Summer work took care of most of the next two years. Graduated on time with a RN Degree. Cost for Dad and Mom -- not much don't even remember. Nr 2 Daughter went to local college George Mason U, stayed at home, worked job part time, then transfered to UVA Nursing school and graduated on time. Cost to Mom and Dad not much, don't even remember. Nr 2 Son (youngest and last child) did not want to go to college. Told him he goes to college or the Army. Opted for the Army, stayed 4 years, finished his AD, got married while in the Army, moved to Florida to be nearer to Dad and Mom, got full time job, used GI bill at Community college first two years then transfered to Univ of No Florida to complete his remaining two years. (BTW his wife also got her 4 year finance and marketing degree at the same time). They both graduated after 4 years of school work. Son got a BS degree, accounting major, then went on and got his CPA. I myself did not graduate from HS and it took me until I was 35 years of age to graduate from college with a 4 years BS degree in Bus Admin. First one in my family that, up to that point, graduated from college. I know times have changed but sometimes I think parents are going too far with "paying for the education" and not far enough in "motivating" the children to "do it for themselves (at least somewhat)". I hope that this will start some meaningful discussion and not on how mean some parent (like me) are. 

 

[TromboneAl]

I wonder whether colleges, when evaluating FAFSA info and deciding on scholarships, make a distinction between

1. Parents don't make money because they don't have a job
2. Parents don't make money because they are retired

 

[Arif]

Thanks for all the great replies. As I relook the college costs of our son I realize that it is a crap shoot with many unknowns. Since we are in Panama I guess we would be considered "out of state" for any college in the US although I do know that Florida State has a satellite college here. I guess we could use relative's address in the state that he might go to college(to qualify for in-state), but not sure if that is permitted. I did find this ranking of schools at Kiplingers website:

http://tinyurl.com/7htoe

Sorry for the long link. [MODERATOR fixed long link--astro]

The most interesting thing about the list is that it shows the average out of pocket costs after aid, which is significantly less than the total tuition. According to the site, aid does not include loans. I wonder how close that is to reality even though it is just an average.

 

[youbet]

sometimes I think parents are going too far with "paying for the education" and not far enough in "motivating" the children to "do it for themselves (at least somewhat)".

And sometimes it is the same parents who are not planning to help with college tuition who are also failing to motivate their children........

DW and I are both first generation college grads and grad school grads.  We know in great detail what it means to get through college unaided.  We both missed a lot of undergrad school, from a recreational as well as an academic aspect, by needing to work many hours a week at our jobs.  We thought that when our son decided to co-op, that was a good compromise between working long hours and "the college experience."  We were able to help and were glad to help with the bills and he responded with good grades in a challenging engineering program, good recommendations from his co-op employers and lots and lots of thanks for us helping him get through debt free.  

Generally, college is expensive these days.  Most folks need to start saving early if they're going to help the kids.  If you wait until yours is old enough that you can determine if they are going to be able to make it on their own, you've waited way too long to start saving.  So, I start funding the grandkid's ESA's at birth.  BTW, ESA's can be transferred from one kid to another, used to fund elementary, highschool or even trade school and even education related hardward, such as a laptop.

So, Old Army Guy, in extreme cases I suppose it's possible for parents, grandparents or other relatives to tell kids that they are "fully funded" for college too early or too often.  We never do that.  But the savings does start while there is time to do so and unknown to the kiddies.  That way, it isn't painful at all and you've got lots of options when the time comes.

BTW, congrats on your fine sounding crew. They've done well and I'm sure your influence is a big part of their success.

 

[Gumby]

..

 

[Arif]

I did something similar to get through college. My grades weren't good enough (3.0 average) and I didn't takle the SAT so I enlisted in the Army. Went to night school with tuition assistance from the Army for two years. I then got a scholarship to go full time courtesy of uncle suga and left college with zero debt and a 3.5 GPA. At the time that was by far my proudest moment knowing that I did a large majority of it by myself. No parental funding just hard work and sacrifice. I want to instill at least some of that drive and determination in my son. Our plan is to pay for half and he finds out how fund the other half through scholarships, grants, part time jobs, etc. He'll also have to maintain at least a 3.0 to maintain the gravy train.
Everyone in life needs a carrot....and sometimes a stick.

 

[youbet]

*And I suppose comparing parents without the knowledge or means to help with parents who readily have the knowledge and means to help is a little bit of an apples to oranges thing. *Like you, I had parents who couldn't help and I found a way to do it myself. *And my respect for my folks is high and I hold no grudge that I had to do it myself.

Yet, since the means is there for my kid's generation and my grandkids' generation to receive assistance, is it wrong to give it? *I think not.

I'm still close friends with several guys I went to school with. *All of them were sent to school with significant support from parents or other relatives. *At school they frequently went to football games on Saturday afternoons while I worked, studied in the evening while I worked, participated in extraciricular activities while I worked, etc. *Today, they all have had good careers, are men of integrity and we're still good friends. *I don't think it would have hurt anything for me to have been able to attend a few games, spend a little more time in the library, etc. like they did. *They seem fine despite it. And I suppose that's how I look at my kids and grandkids. *If they're motivated, hard workers, have common sense and all that, what's the harm if I help them at least enough that they can participate in a full, rounded college life?

Besides, I get a kick out of it!!

This whole discussion of making sure your kids are tough reminds me of the Johnny Cash tune "A Boy Named Sue!"* *

 

[slepyhed]

1) When I went to college, my parents paid for mostly everything. I had some savings and some income, so I paid for what I could - some of the tuition for a couple of years, books, my own "pocket money", but the bulk of the money came from my parents. I chose to commute from home for two years to save on room and board. It wasn't because my parents asked me to or because there wasn't the money available. I was just old enough to realize how many thousands of dollars were involved and I did my part to reduce that. I also realized that I had better be sure to graduate in four years because a fifth year would cost a lot of money.

So don't wait until college to teach your childer the value of a dollar - do it before then.

2) While doing my retire-early spreadsheets, I realized that I was saving some money in one pot (retirement) and more money in another pot (daughter's college). I was planning to save college money into aggressive stock funds for now, and then shift them into less risky investments as college time gets closer.

I've dumped that plan. How am I supposed to know how to time my shift out of stocks? I can't, so I'm not going to try. Instead, I'm saving all of my money into retirment accounts and when college time comes (13 years from now), I'll just stop saving for retirement and use that income to pay for college. Besides, I might be nearing retirement when my daughter enters college (hopefully!). I'm considering allowing my daughter to get some low-cost student loans and then gifting her some money to pay them off over time. Or, since some kids work their way through college... well, why can't I pick up a part-time job bussing tables to pay for her college? That's not so bad, because I don't have to go to classes and do homework. So, yeah, that's my plan - I'm going to work my daughter's way through college.